Any tax experts out there?

I have worked in the valet parking industry since Sept. 2008. I have never worked in an industry where tips were an issue when it came time to do taxes. Now that I have to do my 2008 taxes, I have an issue regarding reporting tips.
The company I started out with was a new company being run by, it turns out, an ex-con who has a laundry list of convictions for fraud and theft. Which explains why he was bouncing half his payroll for the last two months (somehow, my checks always cleared). A larger company just took over many of the accounts, including my place, and the crook is probably about to go to jail again.

Shockingly, this bad company wasn't very good at keeping records. We were full employees (no 1099 stuff). So I got my W-2 in the mail and it shows that I made $170 in tips ... I actually made about 10 times that (I keep a spreadsheet). This causes me concern. I called the IRS anonymously and the helpline guy I talked to seemed to think that if I file my return and report $170, I'll likely be audited and end up paying penalties etc. I can't report the full amount I made, as it will differ from what the crooked company reports to the IRS and that will raise alarms as well.

Advice I've gotten since I talked to the IRS has leaned toward just reporting the $170 ... since I was paid $10/hr on top of the tips. The thinking is that the IRS won't assume we received tips ... we did pay "lot fees," which is another way of saying we had to give some of our tips back to the company.

As an aside, I have two kids and receive the EITC. So it is to my benefit to report the full amount of tips I earned to the IRS. I did report those tips to the crook's company, they just weren't ever listed on my check, meaning neither I nor the crook had to pay FICA taxes on them.

As a Starbucks employee, our W-2s accounted for an average of $1.50/hour in tips. Most of the stores I worked at, it was closer to $3 or $4/hour. I didn't have issues with it for two years (probably will this year, but unrelated, really, to that job).

The issue now is that I stand to pull close to an extra $500 in tax credits if I report the higher tip amount. So I'm working on getting my former employer to send me a corrected W-2. The problem is the guy is crooked as hell and while I reported most of that $1700 I actually made in tips on my lot reports, he didn't record it (hence he didn't have to pay FICA taxes on it, which is illegal as hell).

Now, he's in a heap-load of shit with bad checks all over the place, tons of money owed to former and current clients including the large company that I work for now etc. He's probably going to be irritated to have to do this and pay out FICA on my $1700. So we'll see if I get that new W-2. I really don't want to be on this guy's radar screen anymore ... I've seen his criminal mug and he looks like a serial killer ... and this may get the IRS on his ass (he'll be dealing with my situation plus that of 100-150 employees that he didn't pay correct FICA on). So normally I would let this go and file the $170 in tips ... but that $500 is calling my name!